Order Date – 29 September 2023

Parties: M/s Nalwa Steel & Power Limited Vs Commissioner, Central Excise and Customs, Raipur

Facts –

• The Appellant, M/s Nalwa Steel & Power Limited, is a manufacturer of TMT bars sold its products to both independent buyers and its interconnected entities, M/s Jindal Steel Power Ltd. and M/s Jindal Power Limited. They were considered related persons under Section 4 of the Central Excise Act. The appellant paid excise duty based on JSPL's resale prices and service tax at 110% of manufacturing costs, as per CAS-4 certificates for JPL's usage.
• The books were audited by a special audit team, which found a duty shortfall. Accordingly, a show cause notice dated 29.04.2016 was issued and the demand of duty along with interest and penalty were confirmed.

Issue –

• Whether the valuation of duty to be determined as per Rule 10 or Rule 11 of Valuation Rules?

Order –

• The Tribunal observed that the impugned order, and the OIO value was determined as per Rule 11 read with Rule 4. It was found that Rule 11 can be applied only when the situation is not covered by any of the previous valuation rules. It is undisputed that the appellant and JSPL and JPL are related persons. 
• In this case, there is no allegation or evidence that JSPL and JPL are connected to the appellant in any of the other three ways ways [clauses (i) (ii) or (iv) of clause (b) of sub-section (iii) of Section 4]. There is no allegation that the appellant is either the holding or the subsidiary company of either JSPL or JPL. The only allegation is that they are associated companies and hence they are interconnected undertakings. It has also been alleged that JPL is the subsidiary of the JSPL, i.e., one of the buyers is the subsidiary of another buyer.
• Therefore, this case falls squarely under section 10 (a) of the Valuation Rules and duty was required to be paid as if the appellant and JSPL and JPL were not related persons, i.e., on the transaction value. The appellant was not even required to pay excise duty on the value at which JSPL sold the goods to its customers or on 110% of the cost of production under CAS 4 where the goods were consumed by JPL. Since Rule 10(b) applies to this case, Residual Rule 11 cannot be applied.
• The demand of duty under Rule 11 of Valuation Rules cannot, therefore, be sustained and the appeal is allowed.